Profit

jowensphoto

Been spending a lot of time on here!
Joined
Feb 28, 2011
Messages
2,981
Reaction score
899
Location
Northern Viriginia, US
Can others edit my Photos
Photos NOT OK to edit
What do you consider profit? Obviously there is CODB, but do you consider YOUR pay rate as part of the profit?

What do you consider a good profit margin?
 

ronlane

What's next?
Joined
Aug 3, 2012
Messages
10,207
Reaction score
4,934
Location
Mustang Oklahoma
Website
www.lane-images.com
Can others edit my Photos
Photos OK to edit
I wouldn't count my pay as part of profit. The profit would be return on equity. To me you have to factor in a salary for yourself into the codb. This will help with pricing. So that if you decide on a 5% profit margin, you have room to work with and still be able to pay your bills without loosing money. When biding on a job, you then know that you have 5% of the cost to work with a customer.
 

amolitor

TPF Noob!
Joined
May 18, 2012
Messages
6,320
Reaction score
2,131
Location
Virginia
Can others edit my Photos
Photos OK to edit
This is probably a good question for your accountant. There may be tax implications, for instance. It might be more or less complex, for instance, to purchase new gear out of "profits" than "salary". If you have a day job which (for example) contractually restricts you from earning too much outside that job, there may be other considerations.

It probably doesn't matter much, I am pretty sure most of the legal machinery for small businesses treats all the money the same way whether you paint it profit colored of salary colored. Still, it's worth a check with the accountant. You might have special circumstances.
 
OP
jowensphoto

jowensphoto

Been spending a lot of time on here!
Joined
Feb 28, 2011
Messages
2,981
Reaction score
899
Location
Northern Viriginia, US
Can others edit my Photos
Photos NOT OK to edit
This is probably a good question for your accountant. There may be tax implications, for instance. It might be more or less complex, for instance, to purchase new gear out of "profits" than "salary". If you have a day job which (for example) contractually restricts you from earning too much outside that job, there may be other considerations.

It probably doesn't matter much, I am pretty sure most of the legal machinery for small businesses treats all the money the same way whether you paint it profit colored of salary colored. Still, it's worth a check with the accountant. You might have special circumstances.

Considering what it pays - that would just be cruel and unusual :(

Luckily, I have some friends in the accounting biz :)
 

ronlane

What's next?
Joined
Aug 3, 2012
Messages
10,207
Reaction score
4,934
Location
Mustang Oklahoma
Website
www.lane-images.com
Can others edit my Photos
Photos OK to edit
What day job (other than a photographer) would limit the amount of money you could make outside of that job? And why would you want to work for someone that would want to limit your income?
 

amolitor

TPF Noob!
Joined
May 18, 2012
Messages
6,320
Reaction score
2,131
Location
Virginia
Can others edit my Photos
Photos OK to edit
For one, being on faculty at Old Dominion University. A surprising number of employers would prefer that you focus on working for them!
 

ronlane

What's next?
Joined
Aug 3, 2012
Messages
10,207
Reaction score
4,934
Location
Mustang Oklahoma
Website
www.lane-images.com
Can others edit my Photos
Photos OK to edit
I could see where a university may want faculty to focus on research or writing for text books and stuff like that. I also understand that companies wanting that from a employee at work.

However, for me, I would have to question whether I would want to work for someone that is wanting to limit my earnings potential/power. [maybe that's just me]
 

amolitor

TPF Noob!
Joined
May 18, 2012
Messages
6,320
Reaction score
2,131
Location
Virginia
Can others edit my Photos
Photos OK to edit
It's definitely a question worth asking ;)

On the other hand, it seems to be pretty easy to get around. "My company earned $750,000, but only paid me $2,999.99, which is co-incidently one penny under the limit in my contract. Go suck it."
 

cgipson1

TPF Noob!
Joined
Aug 18, 2011
Messages
17,143
Reaction score
4,350
Can others edit my Photos
Photos NOT OK to edit
When running a business.. I have an account (Salary) and the business has an account (Positive = Profit / Negative = Loss). That was pretty much the way my accountants always had me set it up.
 

Gavjenks

TPF Noob!
Joined
May 9, 2013
Messages
2,976
Reaction score
588
Location
Iowa City, IA
Can others edit my Photos
Photos OK to edit
It doesn't really matter which is which if you have your own business that only employs you. You just get money coming in.

Then, if you spend that money on groceries, you pay full tax on it. If you spend it on photography business related stuff, you get a tax writeoff on that portion. That practical difference is essentially what determines what counts as "wages" versus "profits"

The IRS isn't going to care if you arbitrarily decide to call it "business profits" or not. They care what you spend it on. "You are what you receipt" as they say.



As for just your own personal decisions about whether you are making enough money to be "worth it," don't look at it in terms of profits and wages. Just look at the entire amount of money you have coming in per year minus your expenses. Then consider your opportunity costs. In other words, how much more or less net money could you have made in OTHER PROFESSIONS, or with OTHER PRICING? If any of those amounts are higher than what you got, that's an "opportunity cost" and you have to make a decision about whether to change to that lifestyle instead, or whether the cost is worth it for some sort of "fulfillment" or whatever intangibles.
 

jwbryson1

TPF Noob!
Joined
Apr 21, 2011
Messages
4,280
Reaction score
949
Can others edit my Photos
Photos OK to edit
From a financial accounting standpoint, your profit or (loss) is simply your total revenues - total expenses. So let's say you ran your business for 1 year and were paid a total of $40,000 by your clients during the course of the year. Let's then assume that you had total business expenses of $10,000, including supplies, insurance, depreciation, interest, etc. Your "profit" would be $40,000 - $10,000 = $30,000.

From a tax perspective, it is a bit different because some of the expenses that you claim for "financial statement purposes" are treated differently for tax purposes. For example, on the above hypothetical, let's assume your equipment costs are $15,000 (camera body, lenses, lighting equipment, etc.). For financial accounting purposes, you may depreciate the equipment over a period of 5 years, so you would claim a deduction of $3,000 per year for financial accounting reasons ($15,000 / 5 = $3,000 per year). For tax purposes, however, you may depreciate the same equipment over a different period of time. Assuming a 3 year useful life for tax purposes, you would claim a tax deduction of $15,000 / 3 = $5,000. So your tax depreciation is different from your accounting depreciation.

Make sense?
 

ronlane

What's next?
Joined
Aug 3, 2012
Messages
10,207
Reaction score
4,934
Location
Mustang Oklahoma
Website
www.lane-images.com
Can others edit my Photos
Photos OK to edit
^^^ me too.

Personal:

Equipment = $1,500 / 3 years = $500.00 per year. (Depreciation)
Revenue = $200

Cold hard facts = -$300 on the first year depreciation without paying myself anything or counting all the time I spend working on getting better at photography and post processing.

NOTE: I am not a professional and realize that I am not ready to open my own shop. The revenue I made was because the person I was shooting wanted to pay me and we agreed upon a little something.
 

Most reactions

ClickASnap
Top